On Monday, November 15, the Canadian Real Estate Association (CREA) released its national housing statistics for the month of October. Below, CREA’s Director and Senior Economist, Housing Data and Market Analysis, Shaun Cathcart provides an update on the current state of housing markets in Canada and explains what the data means for members.
The dominant narrative out there about Canadian housing markets has been that they have been cooling off, and that was true in late spring and early summer, at least in a relative sense compared to the first quarter of the 2021.
But if you look back at these monthly blogs since about July, we’ve been watching sales stabilize and prices heat back up in more and more markets. As such, the jump in both sales and prices we saw in October should not come as a total surprise.
The monthly sales number was still not as strong as we were seeing back in the early spring, but that’s because supply has continued to fall, and you can’t buy what isn’t for sale.
When you divide that supply number by the current rate of sales you get the number of months of inventory. From a months of inventory standpoint in October, we were back in the same zone we were in spring 2021—the tightest market conditions ever.
Even at the height of the “slowdown” this summer, the highest we drifted on that measure was 2.3 months of inventory, half of what would be considered normal.
MLS® Home Price Index rose 2.7%
With the Canadian market now back at 1.9 months of inventory, the month-over-month and year-over-year jump in the MLS® Home Price Index (MLS® HPI) benchmark price was similar to what we were seeing this spring as well—very close to all-time records. A gain of 2.7% (or more than $20,000) from September to October alone, and a 23.4% (about $145,000) increase from last October.
But just because listings are scarce and sales have slowed from the spring, this has still been the most active market on record. It’s just that by the time we measure the stock of listings left on the market at the end of any given month, most of the new listings from that month have already come and gone.
2020 was a record-breaking year for home sales
You may recall, 2020 was an all-time annual record for home sales in Canada. We’ve already beaten that in 2021.
In fact, we passed the 2020 record sometime around Thanksgiving weekend. But a new sales record in 2021 was pretty much a lock by Canada Day, unless you thought we’d be in another March/April 2020 style shutdown right now.
But I don’t think too many observers, myself included, would have guessed the monthly sales and price trends would be re-accelerating heading into 2022.
October’s numbers should be taken with a grain of salt. The higher interest rates that used to be way down the road are now knocking on the door.
I expect we’ll see a strong performance in November as well. We’ve seen before, when it becomes clear that higher rates are looming, you can get a pull-forward in sales numbers from the future as people look to make those deals now, locking in current rates before they go up.
The question I would ask at this point: Is what we saw in October (and probably will see in November as well) just a head fake owing to an imminent increase in interest rates, or did the housing market conditions we saw up until this spring just shift over to the backburner for a few months as more people got vaccinated and we tried to have a summer?
Want to learn more? Head on over to creastats.ca.